Onshore contract driller Patterson-UTI Energy Inc. ( PTEN ) declared that its Jul 2013 drill rig count averaged 188, up from 181 in the previous month. The company operated 180 rigs in the U.S. and 8 in Canada in Jul, compared with 179 rigs in the U.S. and 2 in Canada during Jun this year.
Patterson-UTI's activity levels in the U.S. peaked in early Oct 2008 with a rig count of 275. From then through the second quarter of 2009, the company witnessed a steep and rapid decline in rig count on the back of decreased demand, largely caused by lower commodity prices for natural gas and tighter access to credit.
However, with natural gas prices recovering from their multi-year lows amid signs of economic stabilization, Patterson-UTI's monthly rig count numbers have recovered sharply. In fact, its current rig count is up more than 3 times from a low of 60 in May 2009.
Houston, Texas-based Patterson-UTI Energy is one of the largest onshore contract drillers in the U.S. with more than 300 land-based rigs that operate primarily in the oil and natural gas producing regions of North America.
Buoyed by Patterson-UTI's growing premium land rig fleet and the expected demand uptick for such services; we are confident about the company's near to medium term outlook. However, we remain wary of increased labor costs for contract drilling that may lead to slower margin growth going forward.
This accounts for Patterson-UTI's current Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at Dril-Quip Inc. ( DRQ ), Natural Gas Services Group Inc. ( NGS ) and Parker Drilling Co. ( PKD ) as good buying opportunities. These energy equipment service providers - sporting a Zacks Rank #1 (Strong Buy) - have solid secular growth stories with potential to rise significantly from current levels.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.